Common Pitfalls during Home Financing

Realtors....ever have a great deal, one that looks like a slam dunk, only to have it fall apart once the file hits an underwriters desk? Absolutely you have, because it is unavoidable in some cases. A good loan officer should do their best to ask the right questions at the initial loan application, but you never know what can rear its ugly head during processing. Here are some common issues we see and hear about:

1. TAX RETURNS, TAX RETURNS, TAX RETURNS: everyone wants to pay Uncle Sam as little as possible. I get that. What I don't get is why you think you should be able to qualify with more than you tell Uncle Sam you made. For example: if you take unreimbursed business expense deductions (the worst is mileage and car expense, especially for W2'd sales reps), the amount you deduct will be taken out of your W2 income for qualifying purposes. The underwriters will look at two years of your tax returns and average the deducting. That is the amount they will "hit" against your income. It does not matter if you "aren't going to do it again this year (wink,wink)", the underwriters will assume you will until they have proof. This has killed many of deals in the past, and will continue to do so in the future so be careful.

2. SELF EMPLOYED BORROWERS: same issues as above. If you write down all of your income to help you on the tax side of things, get ready for a difficult underwrite. The only line item you can add back to your bottom line for qualifying is depreciation. So, if you take a huge write off, better hope it's depreciation if you want to buy a house. Also, you need two years self employment history in 95% of cases. If your company W2'd you, and then switched to 1099 recently, you will have difficulties.

3. Have a debt that someone else pays? Better have 12 months of cancelled checks to prove it. If you co signed on a car for someone, and they pay you, and then you pay Ford Motor....fuggitaboutit. That debt will be factored into your dent to income ratio.

These are just a few issues that can pop up from time ti time. We are only as good as the information the borrower gives us. So if they think they can not be honest with us on the forefront, it will be figured out, and usually not at the best time (i.e. well on down the road).

If you have a unique situation, call us and we can guide you through the process!